China’s capital markets and the rise of the RMB

by
Douglas Flint

HSBC Group Chairman

The renminbi is already a major global currency

The ascent of the renminbi has been sure and swift, according to Douglas Flint, HSBC Group Chairman. Speaking at the UK-China Financial Forum in London, Mr Flint addressed the emergence of the renminbi as a global currency, the importance of China’s capital markets, and London’s status as a global renminbi centre.

He said: “The emergence of China and the rise of the renminbi go hand-in-hand. And just as China’s rapid yet predictable growth has been a comforting constant at a time of unprecedented global economic upheaval, the ascent of its currency has been sure and swift.

China will assume an increasingly prominent role in global financial flows, particularly as the renminbi becomes more international and the offshore market grows deeper and broader

“The first stage of China’s three-stage plan for the renminbi – to establish it as a trade currency – is already well-advanced. The proportion of China’s total trade settled in renminbi has increased from 3 per cent in 2010 to 18 per cent in 2013. We expect it to reach 30 per cent within a couple of years. And at the end of 2013, according to SWIFT, the renminbi overtook the euro as the number two trade currency in the world.

“The second stage – establishing the renminbi as an investment currency – is also well underway. It is now firmly in the top 10 global payment currencies, up from 20th two years ago."

He added: “The third stage of the renminbi’s development – establishing it as a reserve currency – is the least advanced of the three stages, but many central banks and reserve managers already hold it on a small scale and this will only grow as more countries look to diversify their reserves and gain exposure to the Chinese economy. We can see careful deliberation around this diversification taking place around the globe for multiple reasons.

“Put simply, the renminbi is already a major global currency."

Mr Flint said that China will assume an increasingly prominent role in global financial flows, particularly as the renminbi becomes more international and the offshore market grows deeper and broader. "We expect China’s cross-border capital flows to double within three years of full convertibility and its USD18 trillion of domestic financial assets to underpin global growth over the decades to come."

He said: “At the start of this week, HSBC worked with the International Finance Corporation to issue the first offshore renminbi-denominated green bond. This adds an important asset class to the renminbi and marks its entry into a sustainable finance market that is expanding in size and scope. It is also another essential step on the journey towards full internationalisation.”

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